The Rocky Road To Mobile Coupon Redemption

Decades ago, long before “couponing” became an official word, I recall that my retired grandparents had already made it into a sport. Every Wednesday they bought multiple copies of the local newspapers, because it was coupon day. This was not penny-pinching or saving by retirees with limited budgets. In fact, my emigree Italian grandfather had been an American success story – retiring with a bakery business and owning three apartment houses.

Coupons were something deeper for this couple. They sat on either side of the kitchen table (headquarters in any Italian-American household), and they recited to each other what coupons they were finding, whether to clip it, and who in the family would need it. They were providing for an extended family of children and grandchildren, and not to mention scores of paisanos in nearby Patterson, N.J.. When I was in college and grad school, living on a thread, Grandma sent me packets of coupons of the foods she knew I liked. Who knew that coupons could be turned into emblems of love and attentiveness?

Of course when Grandma and Grandpa passed, they had in their basement more bottles of Tide laundry detergent, Brawny paper towels and mac ‘n cheese boxes than most A&Ps. There is a fine line between coupons as family ritual and pathological hoarding, apparently.

Today the channels through which consumers can capture coupons have broadened considerably since the Wednesday and Sunday newspapers -- but I'm not sure it is quite as easy to apply my grandparents' dedication to “couponing.” As a non-couponer, my only encounter with these promotions is that thick blue direct mailer from Valpak that I used to rifle through in front of the TV in the days before I had an iPad to serve as my prime-time distraction. But in recent weeks the Valpak started showing up in one of my standby mobile apps, CheckPoints, a check-in and rewards app for nearby businesses.

“Our strategy in mobile is to be platform-agnostic,” says Nancy Cook, VP Digital Business Development, Valpak. Its mobile Web site that just relaunched and their apps are slated for relaunch next month. “Out app downloads tripled last year,” she says.

One of the company's more interesting partnerships is with with the augmented reality browser Metaio provider. When you launch the Junaio app and apply the Valpak overlay (all in branded blue, by the way) you can aim your phone around the neighborhood to pick up the local deals. In the case of a rewards app like CheckPoints, a partner such as ValPak can add value by giving CheckPoints members an opportunity build rewards points by checking in with local businesses.

Cook says that Valpak deals are distributed digitally to over 150 sites as well. In all of these cases, the company is providing a daily feed to the partners so the coupons and offers are updated regularly.

As with all mobile advertising and marketing in the digital age, expect a familiar turf war over trying to capture that small business and local service owner that has eluded digital for so long. Incumbents like Yellow Pages, local newspapers, local TV stations, free circulars and coupon mainstays like Valpak all lay claim to having these local clients already on board with traditional media. But getting them into the digital, let alone mobile, mainstream is fraught with challenges.

Valpak’s current cross-platform clients can get into this feed of mobile offers by default, so whatever you get in that weekly packet in the mail may also show up in CheckPoints or in Junaio. Which doesn’t mean that when you try to bring your smartphone into the merchant the clerks know what to do. “There are operational issues,” Cook admits. “Merchants are still trying to understand how to redeem and what to do with mobile coupons. The education process is the biggest hurdle.” And so Valpak provides the local clients with point of sale material so their cashiers can recognize a mobile coupon when they see one. There is a unique ID in the coupon to prevent fraud.

Mobile coupons are a no-brainer. Not having to clip, save and remember to carry print promotions is a convenience that should in theory supercharge the coupon format. But apparently it will take some brains to figure out how to execute on the promise.

Complexity and clutter is something startups thrive on. Thrusting that same sensibility onto Main Street jewelry stores and roofers is a non-starter. The old familiar sales channels like directories, newspapers and folks like Valpak have an opportunity to educate their clients, but mobile offers up new and unfamiliar redemption problems that even printable digital coupons did not. In the decade and a half I have been covering digital media, I lost count of the many schemes I have seen to coax local SMBs into digital marketing. It is unclear to me how successfully that transition really has taken place despite the effort.

I don’t envy the shop owner having to figure out what manner of discount this fellow with the Galaxy II S is trying to pawn off on him this time. And how about that high schooler or the owner’s daughter running the register on Saturday afternoon? They are more anxious about making a mistake than they are in making the digital promotions eco-system flow smoothly for us all.

My guess is that the road to mobile coupon redemption will require concerted effort at the end point of sale. In many ways the digital marketing industry has continued to defer this problem. There is a persistent mismatch between the kinds of businesses, technology and sensibilities that drive digital marketing and those that run local businesses. Until now local businesses could hand off their digital programs to others or just ignore the channel altogether. With mobile, however, that complexity, fragmentation, unfamiliarity comes right into the shop when the slick guy with the iPhone gets impatient with a checkout girl at the general store trying to figure out what Mr. iPhone is trying to show her on his barely visible LCD screen.

Mobile coupons are fraught with difficulties Steve. It's important to differentiate between retailer coupons and manufacturer coupons when discussing the difficulties. A retailer can do coupons very easily because there is no clearing house. It's that clearing house that makes it so challenging for manufacturers and their retailers.

What is the clearing house? Retailers collect coupons and then redeem them for cash. They are in fact treated as cash which is where the rub is. For a mobile coupon to work it needs to be verified that it's valid with the clearing house (sort of the bank for coupons) and then a tick os added to that retailers account for later clearing. For this to work the retailer needs to have their POS connected to the internet. This is why you see so many coupon apps actually are using loyalty cards for the coupons. They merely insert the coupon into the users loyalty card for collection at a later time using their loyalty card or phone number.

Once you have solved the clearing house issue mobile coupons present some basic liabilities for retailers. The primary one is that in many POS situations it's necessary for the consumer to hand their device over to the clerk. Not a good idea. So if you are a retailer you want to close that liability by having a consumer facing scanner or a hand scanner so the device stays in the hands of the consumer.

At the end of the day, assuming you have solved the technical verification issues then a coupon account (like a loyalty card) is the best option. You can imagine that if you were in a grocery store with 15 coupons on your phone then thumbing through each one would be problematic at best.

Without a doubt redemption tracking at the point of sale is the biggest hurdle facing digital coupons right now. Either companies haven't invested in the infrastructure or redemption tracking is an after thought for digital. I'm excited to see where we'll be in a few years.

Thanks for the details Gene. You are right that the manufacturer coupons are an even more complicated issue. But as you point out at the end, it is also a big issue for consumers. Even if you as a consumer can pile the coupons onto a loyalty card for redemption, that takes forethought. Most decisions whether to use a manufacturer coupon are being made in the aisle I imagine and in response to current pricing and alternatives on the shelf. There are a lot of rituals and shopping behaviors associated with grocery coupons especially that are hard tro virtualize. My grandmother wouldn't have been able to pass me a packet of coupons wrapped in concern very readily on a mobile device.

I've seen a ton of great apps, platforms, etc. that can scan a mobile coupon. I think that issue has been solved. The monumental hurdle for mobile couponing are 3rd party clearinghouses who, as of today, do not accept/redeem any mobile coupons. So,CPGs, grocery stores and couponing sites are unable to offer mobile couponing until the final link in the chain will accept and redeem them. There is an interesting mobile couponing company out there called Kou.pn - they recognized that 3rd party clearinghouse were the issue and as a result created their own that backs each program with fraud insurance. Plus, their technology is seamless for the consumer, requires nothing at the retailer's point of sale, and provides some very good training videos for the employees. Consumers want the convenience of mobile coupons, and innovative companies such as kou.pn are filling a void the dinosaur clearinghouses seem to be avoiding, or addressing rather slowly.

Steve Smith is the Editorial Director, Events at MediaPost where he oversees all OMMA and Insider Summit event content. He is also the longtime Mobile Insider/MoBlog columnist for Mobile Marketing Daily. A recovering academic who taught media studies at Brown and University of Virginia, he spent the last decade as a digital media critic for numerous publications and as a digital strategy consultant. He also writes for Media Industry Newsletter and eContent magazine. Contact him here.